Hotelier Carlos Rodriguez Sr. is seeing firsthand how rapidly sentiments are changing while on a trip to Chile to meet with investors in his company, Driftwood Capital.

Fresh off recapitalizing an 18-hotel portfolio valued at $1.2B — and pacing around his hotel room during an interview over Microsoft Teams — Rodriguez acknowledged that it is a difficult time for the U.S. hospitality market because of the immigration and trade policies coming from the White House.

“This topic shows up in every single meeting, every meeting, every investor. And it's affecting us, because they're saying, ‘Well, if you don't want us there, why should I invest there?’” he said. “‘If we're not wanted in the United States, why? Why should we bring our money here? Or why should we travel there?’”

The Costa Rice native founded Coral Gables, Florida-based Driftwood Capital in 2015 with his son, company President and Chief Operating Officer Carlos Rodriguez Jr. It manages 80 hotels across the U.S., with equity stakes in about half of them, Rodriguez said.

“For me, it's the country with the strongest economy, and we have so many things going for us,” Rodriguez said. “I think the future is bright, I really do. But we need to stop shooting ourselves in the foot.”

Nearly a fourth of its holdings now have a fresh capital stack after Driftwood closed on a $330M securitized senior loan from Wells Fargo and $85M in preferred equity from Acore Capital. The recapitalization will pay down debt and return capital to investors in the 4,203-key portfolio across 10 states operating under the Hilton, Marriott and Margaritaville brands.

Four of those hotels are in South Florida, including the 150-key Canopy by Hilton West Palm Beach Downtown at 380 Trinity Place. Driftwood also recapitalized a four-property, $800M hotel portfolio on Florida's Space Coast in September.

With hotel values slipping and consumer sentiment weakening, Rodriguez said the recap's real aim is to buy time until market conditions improve so Driftwood can sell the properties down the line.

“This is basically a way of providing really good returns to our investors, providing them with high internal rates of return, providing liquidity and not having to sell in a bad market,” Rodriguez said.

Hospitality was the only major real estate asset class to see a year-over-year decline in value in the first quarter of 2025, falling 4%, according to a Colliers report. Multifamily, retail and industrial all posted gains, while office values were flat.

Rodriguez said the firm plans to refinance or sell some of the portfolio within three years and exit the entire portfolio within five. He said he’s bracing for a potential recession and shifting investor sentiment across the hospitality sector.

“We're preparing ourselves for that because we do believe if the current administration continues with this act of adding tariffs, we do believe that there's going to be a recession — and we're seeing it,” Rodriguez said. “We're seeing a reduction in reservations.”

Consumer confidence is already dipping, with lodging spending down roughly 2.5% and airline expenditures falling by 6% year-over-year, according to Colliers.

Though the drop remains minimal for now, Rodriguez said early signs of a slowdown are emerging. At the same time, he’s focused on external factors, like tariffs, that could further drive up the cost of building and renovations.

Tariff policies announced on April 2 by President Donald Trump, including a 10% universal tariff along with 25% on steel and aluminum and 145% on Chinese goods, pose an additional strain on construction budgets.

To limit the impact, Driftwood is shifting orders to factories in countries outside of China and negotiating with vendors for quality products and prices, Rodriguez said.

“We're trying to minimize the impact of the tariffs on new constructions and on renovations by trying to see where we can order goods from in other countries,” Rodriguez said. “Unfortunately, the United States doesn't produce many of the goods that we need.”

Another hit is the decline in international travelers, which is down 11.6% year-over-year — excluding Mexico and Canada — according to a preliminary March report from the International Trade Administration. Germany, Ireland and the United Kingdom are among countries that issued travel warnings to their residents after reports of tourists being detained at airports by immigration officials, NPR reported.

It’s a topic Rodriguez called “very, very” concerning, though he noted that much of the country’s hotel business is still driven by domestic travelers. He still holds out hope that the policies will soften and the hotel business will pick up, but the unease is clear.

“There is concern from investors and from foreign travelers,” Rodriguez said. “I'm not going to say that everybody is not going to travel, but they're asking the question, and I don't like them asking the question.”